--Raises WTI Price Outlook, Brent Essentially Unchanged --Sees Lower Gasoline Prices In Second Half Of 2013
By Brai Odion-Esene
WASHINGTON (MNI) - The U.S. Energy Information Administration Tuesday slightly revised up its world oil demand growth forecast in this month's Short-term Energy Outlook, while also raising its outlook for supply from non-OPEC producers.
The agency also adjusted its prediction for the price of West Texas Intermediate crude this year, while leaving its expectation for the price of Brent crude essentially unchanged.
The EIA said U.S. crude oil production increased to an average of 7.3 million barrels per day in April and May 2013, which is the highest level of production since 1992. EIA forecasts U.S. total crude oil production will average 7.3 million bpd in 2013 and 8.1 million bpd in 2014.
In this month's report, the EIA left its forecast for summer gasoline prices unchanged at $3.53 a gallon. For all of 2013 it expects retail gasoline to average $3.48, one cent lower than last month's forecast.
"U.S. gasoline prices are expected to be lower during the second half of 2013, falling to an average of $3.38 a gallon. Increased oil refinery fuel production, particularly as facilities are back on line in the Midwest, and lower crude oil costs will help to ease pump prices," EIA Administrator Adam Sieminksi said in a statement.
The EIA estimates world consumption will be 90.05 million bpd this year, up from the 90.03 million bpd forecast last month. The EIA also revised up its forecast for 2014 demand to 91.29 million bpd from consumption of 91.22 million bpd estimated last month.
As usual, non-OECD Asia - particularly China - is expected to be the main driver of demand growth. The EIA expects refinery crude oil inputs in China to increase in 2013, and sees China oil demand increasing by 410,000 bpd in 2013 and by 430,000 bpd in 2014.
The EIA cautions, however, that "recent data indicating a weaker industrial sector and a tightening money supply in the first half of 2013 signaled slower economic growth than in prior years and, if it continues, China's oil demand growth could potentially be lower than projected in the current STEO."
Meanwhile it sees oil output from non-OPEC producers ramping up at a faster pace than it projected last month, putting downward pressure on oil prices - especially WTI.
"The price discount of West Texas Intermediate crude oil to Brent oil, which was more than $23 per barrel in mid-February, fell below $5 per barrel in early July," Sieminski said. "EIA expects the WTI discount to begin widening again, to $8 per barrel by the end of 2013, as crude oil production in Alberta, Canada recovers following the heavy June flooding and as midcontinent oil production continues to grow."
Brent crude prices are forecast to be $104.68 a barrel in 2013, compared to the last month's estimate of $105, while WTI crude prices were revised up to $94.65 from $93 last month.
Separately, the EIA estimates that global liquid fuels production outpaced consumption in the second quarter of 2013, resulting in an average global liquid fuel stock build of 300,000 barrels per day compared with an average second quarter stock draw of about 210,000 bpd over the last four years, "thus producing a swing of over 500,000 bpd."
On the supply side as mentioned already, most of the projected growth is expected to come from unconventional output in North America - U.S. tight oil formations and Canadian oil sands. Overall non-OPEC supply is expected to be 53.94 million bpd in 2013, an upward revision of 1.2 million from last month. Production in 2014 is forecast at 55.53 million bpd, unchanged from June's expectation.
Meanwhile, OPEC is expected to supply 30.2 million bpd to the market this year, an amount that is expected to decline slightly in 2014 to 29.9 million bpd.
The EIA estimates that OPEC surplus capacity, which is concentrated in Saudi Arabia, averaged about 2.7 million bpd in the first quarter of 2013, and projects it will increase to an average of 4.6 million bpd in the fourth quarter of 2014.
Also in the report, the 2013 natural gas consumption forecast was revised up slightly to to 70.1 billon cubic feet per day, compared with 70.0 bcf per day in the previous report.
"Colder winter temperatures forecast for 2013 and 2014 (compared with the record-warm temperatures in 2012) are expected to increase the amount of natural gas used for residential and commercial space heating," the EIA said.
"EIA expects natural gas prices will remain below $4 through the end of 2013, as production remains robust and coal regains some of its lost share of the electricity generation market," Sieminski added in his statement.
He noted that natural gas prices fell in June to $3.83 per MMBtu from $4.04 per MMBtu in May.
The EIA revised up its price forecasts, predicting an average of $3.76 MMBtu for 2013 after a June estimate of $3.92 MMBtu. It sees the price then rebounding to $3.91 in 2014.
--MNI Washington Bureau; tel: +1 202-371-2121; email: besene@mni-news.com